SpaceX Volatility and Market Risks
Given the extreme surge in SpaceX, we see its implied volatility now topping 150%, a level reminiscent of the dot-com bubble. This makes buying protective puts an expensive but potentially necessary strategy to hedge against a sharp reversal from its valuation of 150 times sales. The risk of a correction is high, as early venture capital investors are likely using this price level to exit their positions.
However, the acquisition of Curser suggests an aggressive growth strategy, which could fuel further upside. For traders, this makes selling out-of-the-money puts an attractive way to collect the high premium, capitalizing on the elevated fear. Data shows the put-to-call ratio on SpaceX has climbed to 1.2, but this is still moderate for such a rapid ascent, indicating many are not yet positioned for a collapse.
We believe the recent parabolic rise in gold to $5,400 an ounce in the first quarter, followed by its consistent decline, serves as a recent cautionary tale. That pattern suggests that what goes up this fast can come down just as quickly, making long volatility strategies like straddles or strangles potentially profitable. We saw a similar story with tech darlings in late 2021, many of which fell over 70% in the following year.
Broader Market Rotation and Sector Performance
The broader market is showing a clear rotation out of technology, with the Nasdaq 100 falling over 1% while the Dow Jones outperforms. We should consider buying puts on semiconductor ETFs, as names like Nvidia and Broadcom are leading the declines. At the same time, we can look at call options on industrial or financial sector ETFs, which are benefiting from this capital shift.
The drop in Brent crude below $80 per barrel, driven by a credible peace deal, has fundamentally altered the outlook for energy markets. The futures market has deepened its contango, with front-month contracts trading at a significant discount to later months, signaling immediate oversupply. This supports staying in short positions on oil futures or buying puts on major energy stocks, which are now the second-worst performing sector.
Finally, with bond yields falling ahead of tomorrow’s Federal Open Market Committee meeting, the market is pricing in a less aggressive monetary policy. The CME FedWatch Tool now shows a 90% probability of a rate hold, a sharp increase from last week. This environment supports cyclical stocks over tech and suggests volatility may calm down in non-tech sectors following the announcement.
SpaceX advanced a further 9% on Tuesday, taking its rise since last week to 40% and lifting its market capitalisation to $2.78 trillion. That puts it above Amazon and about $200bn short of Microsoft, making it the world’s fourth most valuable company. The shares are trading at more than 150 times sales. Separately, the company has started deploying the $85bn raised in its IPO, including through the purchase of Curser, a move linked to AI-generated coding and its capacity to fund further strategic acquisitions.
The rally has diverged from broader US tech moves, with the Nasdaq 100 down more than 1% as Intel, Marvell, SanDisk, Broadcom and Nvidia led declines. Gold was cited as a recent reference point: after reaching $5,400 an ounce in Q1, it is down 6% over the past month, while SpaceX’s valuation now exceeds twice the value of US gold held at Fort Knox, estimated at $1.25–$1.3 trillion. In commodities, Brent crude traded below $80 per barrel as a deal to end the war was described as credible; President Trump said details would go to Congress later this week and that the Strait of Hormuz is open. The Dow Jones outperformed the Nasdaq, energy was the second-worst sector after tech, and bond yields fell ahead of Wednesday’s FOMC meeting.
